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SAIL's export drive hits another roadblock - Views on News from Equitymaster

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SAIL's export drive hits another roadblock

Jan 31, 2000

The Steel Authority of India Limited (SAIL) has once again become the focus of an anti dumping probe. This time the country in question is Canada. This has been reported by a leading national daily. SAIL is the world's 10th largest and India's largest steel manufacturer. It operates 4 integrated steel plants and 2 speciality steel plants. The company has been on the brink of bankruptcy for some time now. It is attempting to raise resources by getting rid of its loss making units.

The Indian steel manufacturers have once again become the target of an anti dumping probe. If Canada was to levy a countervailing duty on SAIL's exports it would be the third body after the US and European Union to do so. This would in effect cut of SAIL's unrestricted access to one of the most lucrative markets for its products.

The probe has been launched against the exports of hot rolled carbon steel sheet plates following a complaint filed by a competitor. The Canadian government has also alleged that steel exports were being subsidised by the Indian government under various schemes like the Export Promotion Credit Guarantee scheme.

SAIL definitely stands to lose in case the Canadian government were to impose anti dumping duties. The company would suffer a body blow especially in the context of its worsening financial position. In view of the restrictions imposed by leading importers of steel, SAIL may have to focus on the domestic markets. This would create price pressures in the domestic markets (as economic growth is still nascent) and could lead to lower realisations. However, the after effects may be more subdued than anticipated.

The international steel markets have firmed up considerably over the last several months. This is mainly due to a surge in demand as world growth picks up after the slowdown in 1998. SAIL would thus still have an opportunity to export steel to other international destinations. Although the realisations may not be strictly comparable, it will nonetheless protect the company from a decline in export volumes.

This issue once again highlights the grey areas of the WTO agreement (pertaining to what constitutes a subsidy). Developed countries like the US and Europe have been resorting to measures that protect domestic manufacturers from international competitors. They have on the other hand increased the pressure on developing countries to further bring down import barriers. Whether such a mechanism will last for long (in view of these tactics) is itself questionable. Already, developing nations have been increasingly lobbying to protect their turf in the WTO. The need of the hour is a stronger WTO regulatory mechanism that is not controlled by developed nations.


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